Should You Buy A Brand New Launch Or A TOP Development As A HomeOwner?
When searching for our next home, the options available spans between a resale or a new launch development.
Even in their respective categories, there are also different choices that will suit different people.
Today, we are going to explore buying a new launch condominium at 2 different stages, brand new developments versus developments that are near to obtaining, or have already obtained TOP.
Let us look at each scenario’s pros and cons from a homeowner's perspective to determine which might be the better option for you.
Let the Fight Begin! ( Source: Giphy )
Price
In terms of absolute pricing, buyers of a brand new launch development will usually enjoy a discount by being an early mover.
New Launch Pricing Strategy ( Source: Navis)
Developers use a "loss leaders" strategy during the launch to spur sales and garner favourable media opinion. This phase will bring more attention to the launch and potentially increase the interest of potential buyers.
There will be a gradual price increase while offering different discounts and freebies to entice interested buyers. This tactic gives the later comers a sense that they are still getting a good deal at this stage.
After more than 50-60% of the units have been sold, there will be a further price increase to average out the first phase's loss leaders.
It will ensure that the developer makes back a decent margin on the project.
Then comes the final stage, where unsold units near the TOP will see a further price increase or decrease in discounts and freebies.
If the quantity on hand is low, developers will usually wait out as they are confident that buyers will come for the last few units.
The difference in the profits can be pretty substantial between entering the property at launch and TOP.
In certain developments, the very first batch of buyers was sitting on a paper gain of more than $100,000 over the launch weekend!
Overall, there can be a 10-20%, sometimes even higher price advantage when entering the development at the new launch stage.
New Launch Buyers 1 : TOP Buyers 0
Exit Advantage
When it is time to sell, TOP will be at a disadvantage in the early years
Other than the apparent profit, another advantage of taking the early move comes during the exit.
As buyers at launch have already profited before the TOP buyers enter, they would be able to sell at a lower price than the TOP buyers if they choose to.
These will present a massive advantage over the other sellers, especially when there are many listings simultaneously.
TOP buyers will find themselves stuck if they are urgent to sell.
They either accept a lower price, possibly with no profits or hold on until the new launch sellers have cleared off.
New Launch Buyers 2 : TOP Buyers 0
Lower Monthly Payments
The other advantage that new launch buyers have over TOP buyers is the monthly mortgage that they are servicing.
As a new launch payment is progressive, the initial stages up to TOP will be a very comfortable sum for many.
It starts from just 25% to 60% of the purchase price just before TOP.
When a TOP buyer comes in, they would have to pay straight up to 85% of the purchase price. Depending on how far the development is from attaining CSC, they might soon be paying the full 100%.
This will make their monthly mortgage much higher from the start.
While the monthly payments are still low, new launch buyers could continue to build up their CPF to cater for their mortgage payments.
New Launch Buyers 3 : TOP Buyers 0
Choice Units
This is self-explanatory.
Being the first means that you will get choose from a much wider pool of units.
This will ensure a very good chance of selecting a choice unit that can outperform the same unit mixes in the development.
For example, you can choose the units with the best views, high floors and best facings.
This advantage will allow you to sell your unit in the future at a better price than the others..
New Launch Buyers 4 : TOP Buyers 0
Alternative Accommodation
New launch buyers may have to rent multiple times before moving into their new home
Now is the time for TOP buyers to fight back!
For TOP buyers, they will usually be able to move into their new home straight after completing the sale of their current house.
They do not have to look for another place to rent while the development is building.
New launch buyers will have to stay in alternative housing, usually a rental unit.
This can set them back a pretty considerable sum as they would have to rent the entire waiting period for the new launch.
This cost can go upwards of $100,000 over the period, renting a 3 Bedroom accommodation, regardless of HDB or condominium.
This cost would sometimes make up for the difference in purchase price with the TOP buyers.
New Launch Buyers 4 : TOP Buyers 1
Convenience
Nobody likes the hassle of moving.
In a TOP buyers case, they would only need to move their belongings once.
The new launch buyers will need to rent a place, possibly get rid of some stuff if the rented unit is too small for all their belongings.
If they have too much stuff, they might even need to rent a storage facility to store all these extra things that they could not fit into their rental.
They might even have to suffer a further inconvenience of moving another time if there are some issues with their rental, for example, if the landlord decides not to extend their lease or increase their rent.
This will further add on the cost by the need to pay agent fees, moving fees and other fees that come along with shifting around.
Not to mention the huge inconvenience that you would have to suffer.
New Launch Buyers 4 : TOP Buyers 2
What you see is what you get
One significant difference between buying a brand new launch and buying at TOP is that you will get to see the real deal.
Many times, homeowners get a shock when they receive their keys to their new home and realise how different it looks from the beautifully furnished show flat unit.
Developers strategically designed the show flat units to let you feel that the unit is bigger by removing particular walls and doors.
This gives buyers the illusion of having a bigger home. Most buyers will not linger around for more than 10 mins in the show flat unit nowadays due to the crowd and the limitation imposed due to safety distancing rules.
A TOP buyer will be able to see what he is buying before putting his money down. They will be able to visualise better how they can make use of the space and whether it is really suitable for them.
They can also have a feel of the facilities and environment of the development.
That is when buyers will discover the clever tricks that developers use to increase the number of facilities in their development.
Suddenly every pavilion has a name and every other space is called an exercise deck.
New Launch Buyers 4 : TOP Buyers 3
Bonus Round ( Discounted Sale )
Although rare, there are chances where TOP buyers will be able to fish for a bargain at this stage.
Especially in times of economic uncertainty, there might be instances where early buyers are unable to continue owning the property due to financial reasons.
They will attempt to sell their unit at a discounted rate just to get it off their hands and have some cash to tide over the tough times.
This is when TOP buyers can come in to scoop up a unit at an attractive price.
New Launch Buyers 4 : TOP Buyers 4
Conclusion
All things being equal, buying a brand new development at different stages has its pros and cons.
Always factor in the finances to suit your plan. What may be good for others might not be suitable for you.
For example, if you intend to stay at this property for the long term, you will find it easier to exit it at the price you are comfortable with, even if you are buying at TOP.
The sellers who wanted to bag the profits would have already done so, and the market for the development would have more or less stabilised.
This would then not be a disadvantage to you.
This is just one of many scenarios that might change the status quo that will the the advantages in your favour.
